The population of retirees is expanding at a notably faster rate than the influx of new workers, ushering in an unprecedented phenomenon of an aging America that will reshape our economic and labor landscape.
In the last five decades, the baby-boomer generation, born between 1946 and 1964, has significantly impacted the American workforce. As they age, the workforce is progressively growing older. As these individuals retire, the ratio of workers to retirees will decrease significantly, reaching an all-time low.
Social Security and Medicare, which rely on contributions from workers to maintain older generations, are at risk due to the declining worker-to-retiree ratio. As the proportion of people of working age decreases, the financial foundation of these programs is under threat. Both programs face potential funding shortfalls in the next decade unless taxes are raised, or benefits are curtailed.
It’s not that younger individuals are less motivated to work; instead, they constitute a smaller portion of the population than the boomers. The baby-boomer generation had fewer children on average than their predecessors, and this pattern has persisted with each successive generation. As a result, there aren’t enough Gen Xers and millennials to offset the increasing number of retirees. The demographic shift is predicted to negatively affect economic growth.
Many baby boomers are choosing to work beyond the traditional retirement age, which has helped to alleviate their departure from the workforce. Many Americans choose to work into their 60s and 70s due to longer life expectancies, financial incentives to delay retirement, and economic necessity. While this trend experienced a temporary setback during the COVID-19 pandemic, many who retired early are returning to work.
Consequently, the average age of the workforce is at an all-time high. In 1984, individuals under 40 constituted over 60 percent of the workforce, but that figure has now dwindled to 45 percent. Over the same period, the representation of workers over 60 has doubled.
As the number of retirees increases, so does the need for healthcare services. This sector is expected to create a significant number of job opportunities in the next decade. However, shortages in care services are already prevalent and are expected to worsen as the number of individuals needing care rises. Meanwhile, caregivers remain scarce or are diminishing.
As services like long-term home health care are typically not covered by Medicare or standard health insurance, individuals often deplete their resources paying for these services until they become eligible for Medicaid, which does cover long-term care.
When elderly Americans cannot afford or locate suitable care, family members are responsible. According to a KFF poll conducted in 2021, one in five Americans already provide ongoing support to close family members or friends. Caregiving can bring a sense of purpose, but it can also lead to financial strain, health issues, and a departure from the workforce.
To effectively tackle the challenges an aging population presents, policymakers need to agree on contentious issues like immigration and entitlement programs. Unfortunately, these issues have been stuck at a standstill in Congress for years.
Meeting these challenges demands a multifaceted strategy. One potential solution involves increasing immigration to bolster the working-age population and counteract the aging trend. Immigrants tend to be younger on average and have been a key driver of the country’s population growth. Additionally, research from the Cato Institute and the National Bureau of Economic Research indicates that greater immigration can improve outcomes for those dependent on long-term care.
Social Security faces an impending shortfall, with full retirement payments projected to be unsustainable starting in 2033 without Congressional intervention. However, the program has not been legislatively updated for four decades. Lawmakers must decide whether to curtail benefits, raise the retirement age, or elevate taxes to avert insolvency.
The challenges the aging population poses have been evident for decades, yet effective policies to address these issues have been lacking. The consequences arise from the demographic shifts and the absence of adept policies to navigate their repercussions.